Gold inched up on session 01/02/2016

Last Friday (29/1), the gold price was escalating as the fourth-quarter GDP largely matched economists’ expectation. The price moved in small range between $1,108.21 and $1,118.38/oz, before setting at $1,117.83/oz, up 0.26% compared with the opening price $1,114.22/oz.

The rise in the gold price was mainly due to the disappointing US gross domestic product (GDP) in the last quarter in 2015 and the doubtful compression of the US economy which put a strain on the Fed’s tightening policy.

The price of the precious metals gains support from the weak U.S. GDP data which raised hopes that the Federal Reserve may slow any planned interest rate increases. According to the Commerce Department, the U.S. economy grew at an annual rate of 0.7% in the fourth quarter, missing expectations for growth of 0.8% and slowing from 2.0% in the previous quarter. The GDP for the whole year totalled 2.4%. It is believed that there had been very little spending in the US as the consumer sentiment reported by University of Michigan got mild 92.0 points, missing the forecast of 93.1 and also the previous month at 93.3. On account of the strong dollar and the global wobbly demand, the goods trade balance indicating the difference between export and import was trapped in negative territory as low as minus 61.5 billion, falling further than the previous month.

The recent softness in the US data and the turmoil in financial markets have leed many analysists to push the timing of the next Fed hike rate closer to July. A gradual path to higher rates which is supposed to hurt the US dollar is seen as beneficial for the yellow metals as the non interest asset. In addition, the uncertainty about the equities triggered the demand for a safe haven asset.

The economic weakness in China and the latest GDP has cast a doubt on the US economic health, about whether the US economy conditions for the time being will be able to withstand another rake hike or not.